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Mexico?s Peso Drops After Carstens Says Economy to Slide on Flu
2009-04-30 22:16:30.799 GMT
By Valerie Rota
April 30 (Bloomberg) -- Mexico?s peso fell for the first
time in three days after Finance Minister Agustin Carstens said
the economy will drop for the next two or three months, reviving
concerns the swine-flu outbreak will deepen a slump.
The peso declined 0.9 percent to 13.8407 per U.S. dollar at
5 p.m. New York time, from 13.7197 yesterday. The drop was the
biggest among the six most-traded Latin American currencies.
Carstens ?acknowledged that the flu will have a negative
effect,? said Luis Flores, an economist at IXE Grupo Financiero
SA in Mexico City. ?The peso isn?t taking this well.?
Carstens spoke today in an interview on Televisa after
officials yesterday said the government will suspend all non-
essential services from May 1 to May 5 and urged businesses to
close to reduce the risk of spreading the flu, which is
suspected of causing 176 deaths. At a press conference
yesterday, he said the outbreak in Mexico may cut gross domestic
product by an additional 0.3 percent to 0.5 percent this year.
President Felipe Calderon, in a televised address last
night, also urged businesses to close from May 1 to May 5 in
order to minimize the infection. Banks, pharmacies, airports,
bus companies and supermarkets will remain open, he said.
Financial markets are closed tomorrow in Mexico because of
the Labor Day holiday.
Mexico?s peso has weakened 3.6 percent this week, paring
its advance in April to 2.4 percent.
Peso Bonds
The outbreak of the swine flu is hurting an economy already
faltering from decreased demand for Mexican exports from the
U.S., its biggest trading partner, slower remittance flows and
declining tourism revenue. Banco de Mexico yesterday forecast
the economy will shrink as much as 4.8 percent, compared with a
previous estimate of a contraction of as much as 1.8 percent.
Mexican peso-denominated bonds fell, pushing yields on the
benchmark security up from a one-week low. Yields on Mexico?s 10
percent bond due December 2024, the country?s most-actively
traded security, rose six basis points, or 0.06 percentage
point, to 8.01 percent. The bond?s price fell 0.55 centavo to
117.66 centavos per peso, according to Banco Santander SA.
Concern the flu will deepen the slump is boosting
speculation the central bank will cut its key lending rate by as
much as 0.75 percentage point next month, Flores said.
Banco de Mexico may slash its key rate to 5.25 percent from
6 percent at its next policy meeting on May 15 and reduce its
target to 4.75 percent in June, said Flores. The central bank
cut its key lending rate four times this year from 8.25 percent.
Mexico?s Peso Drops After Carstens Says Economy to Slide on Flu
2009-04-30 22:16:30.799 GMT
By Valerie Rota
April 30 (Bloomberg) -- Mexico?s peso fell for the first
time in three days after Finance Minister Agustin Carstens said
the economy will drop for the next two or three months, reviving
concerns the swine-flu outbreak will deepen a slump.
The peso declined 0.9 percent to 13.8407 per U.S. dollar at
5 p.m. New York time, from 13.7197 yesterday. The drop was the
biggest among the six most-traded Latin American currencies.
Carstens ?acknowledged that the flu will have a negative
effect,? said Luis Flores, an economist at IXE Grupo Financiero
SA in Mexico City. ?The peso isn?t taking this well.?
Carstens spoke today in an interview on Televisa after
officials yesterday said the government will suspend all non-
essential services from May 1 to May 5 and urged businesses to
close to reduce the risk of spreading the flu, which is
suspected of causing 176 deaths. At a press conference
yesterday, he said the outbreak in Mexico may cut gross domestic
product by an additional 0.3 percent to 0.5 percent this year.
President Felipe Calderon, in a televised address last
night, also urged businesses to close from May 1 to May 5 in
order to minimize the infection. Banks, pharmacies, airports,
bus companies and supermarkets will remain open, he said.
Financial markets are closed tomorrow in Mexico because of
the Labor Day holiday.
Mexico?s peso has weakened 3.6 percent this week, paring
its advance in April to 2.4 percent.
Peso Bonds
The outbreak of the swine flu is hurting an economy already
faltering from decreased demand for Mexican exports from the
U.S., its biggest trading partner, slower remittance flows and
declining tourism revenue. Banco de Mexico yesterday forecast
the economy will shrink as much as 4.8 percent, compared with a
previous estimate of a contraction of as much as 1.8 percent.
Mexican peso-denominated bonds fell, pushing yields on the
benchmark security up from a one-week low. Yields on Mexico?s 10
percent bond due December 2024, the country?s most-actively
traded security, rose six basis points, or 0.06 percentage
point, to 8.01 percent. The bond?s price fell 0.55 centavo to
117.66 centavos per peso, according to Banco Santander SA.
Concern the flu will deepen the slump is boosting
speculation the central bank will cut its key lending rate by as
much as 0.75 percentage point next month, Flores said.
Banco de Mexico may slash its key rate to 5.25 percent from
6 percent at its next policy meeting on May 15 and reduce its
target to 4.75 percent in June, said Flores. The central bank
cut its key lending rate four times this year from 8.25 percent.